The First Five Days Are in and We're Letting the Data Talk to Us
With seasonal indicators split so far, we’ll stick to following the data.
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Wednesday night closed out the time frame for “the first five days” indicator, and while it wasn’t the biggest gain at 0.6% for the S&P 500, it was still positive.
Since 1950, the S&P 500 has posted a median full-year gain of 16% after a positive first five trading days of the year, rising 81.3% of the time. But, as you likely recall, a Santa Claus rally did not emerge this year, and this means we are one for two for the trifecta of seasonal indicators that traders use to gauge the potential outcome for the year ahead. The third indicator, the January barometer, remains ahead of us and for those unfamiliar with it, it is simply how the S&P 500 performs during January.
As we’ve discussed before, while we don’t hang our hats on these indicators, we are mindful of them largely because the market is as well. While we aim to outperform the herd by thinking differently than it does, it always helps to keep in mind what it’s thinking. A big part of that thinking differently is following the data and, as we like to say, letting it talk to us.
That means we’ll be back at it on Friday with the December Employment Report, which is expected to show 160,000 jobs added during the month, a flat 4.2% Unemployment Rate and year-over-year average hourly wage gains of 4.0%. The expected sequential drop from 227,000 jobs in November is just shy of double the 16% drop we saw comparing the November and December jobs data from ADP. Let’s remember the swing we saw in the November Employment Report from the hurricane-impacted October one, and odds are that some sizable revisions are likely to be had. With that in mind, we’ll look at Thursday's figures through a three-month moving average lens, which is most likely the same one the Fed will use to assess the data.
